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EU tensions over austerity

Gavin Hewitt | 12:10 UK time, Wednesday, 13 October 2010

Each day a European government wrestles with how to reduce its budget. The cuts are painful. Cherished benefits are being cut or trimmed. Public sector wages are being frozen or cut. Each week protesters take to the streets to mark their outrage.

One of the cheerleaders for the age of austerity is the EU. One commissioner said "we shall have to work harder". Another said "no one can live beyond their means forever - not even governments".

EU countries' flags in Strasbourg

It may come as a surprise to learn that the European Commission is seeking a 5.9% increase in the EU budget for 2011. Today the House of Commons gets a chance to debate the proposal. It comes a week before MPs will discover which programmes are to be sacrificed, in what is billed as a brutal cull of public spending.

Now the British government has opposed the increase in the EU budget. David Cameron has said that "we can't ask our members of the public to pay more in the UK and have to pay more in Europe as well". The Chancellor, George Osborne, calculated the increase would mean an extra £600m in Britain's gross contributions to the EU.

Britain suggested a freeze and got support from Austria, the Czech Republic, Denmark, Finland, the Netherlands and Sweden. But the initial battle was lost. A compromise was reached in which spending would increase by 2.9%.

Privately officials accuse the EU of hypocrisy, of talking the talk over austerity but not walking the walk.

But the matter has not been settled. Under the Lisbon Treaty members of the European Parliament have more powers over the EU's budget. Many MEPs, it turns out, not only back the full increase to the EU's budget but some want to go further. Their argument is that much of the EU's money goes towards regional development and infrastructure projects. They see the EU as almost an ongoing stimulus package, where more spending is good for growth. It is, of course, the same argument used by those who say that reducing deficits will harm the recovery.

Whilst some of the extra money goes towards infrastructure projects some of it will support the increase in spending on the EU bureaucracy. Over two years the pay of officials will increase by 3.7%. Civil servants in Spain, Greece, Ireland and Portugal are not so fortunate. They are facing wage cuts and there is a freeze in many other countries.

Some of the extra money will go to finance new institutions set up by the Lisbon Treaty, including a diplomatic service and a presidency.

Now currently there is deadlock between what national governments are prepared to accept and the wishes of some MEPs. There will now be an attempt to reach a compromise deal under the guiding hand of the EU Commission. If no deal is reached then the 2010 budget would continue. That would be just fine with the UK government.

Some MEPs are tired of this way of financing the EU budget. They want the EU to raise taxes directly. "It is opening the taboo subject," said one. France, Germany and the Netherlands immediately rejected the idea of direct EU taxes. It is interesting to know whether voters across the EU would support such an idea.

While on the subject of money, Britain is deeply opposed to new EU proposals on maternity and paternity leave. Mothers would be able to take up to 20 weeks off on full pay. Fathers would get two weeks. However desirable, the proposals would double the cost of maternity leave. An extra £2.4bn a year is the calculation.

National governments across Europe are having to reduce benefits; the EU is seeking to expand and increase them. Two different approaches to a time of austerity.


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